$1 invested in entrepreneurs generates extra $5— Elumelu

Tony Elumelu, chairman of Tony Elumelu Foundation, says every $1 invested by multilateral institutions in African entrepreneurs generates up to $5 in additional investment.

In his article entitled, ‘Harnessing the power of African SMEs for economic growth’, which he wrote as part of the International Trade Center’s 2017 report on SME Competitiveness, Elumelu says African SMEs are already on the rise, with small companies accounting for more than 60 percent of the continent’s business-to-business spending.

He says that the figure rises to over 80 percent in Nigeria, Kenya, the United Republic of Tanzania, and Ethiopia.

According to him, at least 42 African countries have explicit policies and strategies that provide SMEs with training, finance and an enabling environment, citing Ethiopia where federal and municipal agencies work together to provide managerial training and financing for SMEs as an example.

For Nigeria, he says it is necessary to remove unfair regulations and bureaucratic bottlenecks that increase the cost and time of doing business, adding that many SMEs face challenges and constraints caused by inefficient infrastructure – both hard and soft.

According to the 2017 SME Competitiveness Outlook, regional trade is the most common form of trade for SMEs.

“SMEs typically look at neighbouring countries for their first international operations. They also find it easier to export as suppliers to a value chain than as producers of a final good. The extent to which value chains operate within the home region of SMEs therefore matters to them, and any strengthening of region-based value chain operations is likely to be of interest,” the report says.

It adds that a small business seeking to be competitive or becoming a supplier to a multinational or large domestic company needs to demonstrate that it has sufficient control over its own supply chain, has the right contracts and processes in place, and can ensure delivery on time and with the required quality.

It further says that Nigeria has unrealised potential to increase existing exports lies outside its home region, notably to Asia and Europe.

“Nigeria cocoa beans have an unrealised export potential of around $209 million to Asia and $141 million to Europe. Other products with unrealised potential to these regions include fresh or dried cashew nuts and unwrought aluminium alloys.”

“Regarding new export products, Nigeria has diversification opportunities in metals, chemicals and beverages with products such as ferrous products, mineral or chemical fertilisers, and unfermented orange juice. The production of the latter good involves a relatively strong representation of SMEs and women and scores relatively well on the price stability indicator.

“Other products identified for diversification include ferro-nickel and vegetable waxes. Small firms in Nigeria perform well in accessing an educated workforce. They underperform, however, in using e-mails or business websites, and having audited financial statements. The largest gap between small and large firms lies in owning foreign technology licences. The country’s national environment scores well in ease of getting credit,” the report states.

ODINAKA ANUDU